"Store of the Future" is a popular term that gets thrown around retail circles quite frequently. But, sadly, it is a term fraught with peril, often cited, and yet rarely understood.

As a former Store of the Future executive, whenever I hear someone use the term, I usually stop them in their tracks and say, "Hold on a second. What do you really mean?" Because whenever someone utters the phrase "store of the future," chances are he or she is talking about one of three things—all three of which are quite different in their purpose and intent.

The below illustration sums up well the different types of store of the future work one might encounter:

Store of the Future DecodedOmni Talk

The most commonly heard reference to "store of the future" work is Track #1: Incremental Work.

The work may sound "futuristic" in nature, but, at the end of the day, it doesn't really change the fundamental principles upon which a retailer operates. It is the track most often picked up by the media. It is regularly discussed on earnings calls, in press releases, via television interviews, etc. It usually pertains to work that risk-averse CEOs are confident they can scale across their organizations on a short-term time horizon.

New in-store pickup options, new loyalty benefits, and new product launches are all great examples of incremental-type work—i.e. they are all concepts that might make a retailer or a store operation different from what it looked like in the past, but they don't necessarily position a retailer against future business model disruption or ready it for business model transformation.

Track #2 is true "Store of the Future" work. It refers to the deployment of scaleable business models that run on entirely different economics than anything a company has ever undertaken before. In many ways, they can be large or small "North Stars" for business model transformation and innovation.

Great examples of true store of the future work include Amazon Go, Restoration Hardware's new mega experience stores, Bonobos' guide shops, and, of course, Warby Parker's omnichannel mountains of majesty. They all work on different business model economics and all have hit some level of sustainable scale within the marketplace. For Amazon Go, it's no cashiers. For Restoration Hardware and Bonobos, it's no onsite inventory for purchase. And, for Warby Parker, it's business model economics rooted in the blend of an offline and online mindset and P&L.

Now, generally, most Track #2s also have their origin from another track within the diagram, that being Track #3: Concept Work. Concept work is often overlooked but is just as important, if not more so, than all the other tracks mentioned. A Jeff Bezos quote on failure from 2015 sums up the strategic importance of concept work best:

I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins...Given a ten percent chance of a 100 times payoff, you should take that bet every time. We all know that if you swing for the fences, you're going to strike out a lot, but you're also going to hit some home runs...Big winners pay for so many experiments.

Concept work is akin to the "concept car" within the auto industry. It is all about conducting experiments live and in front of consumers. Some of the experiments might work, some might even fail, but the successes or the failures do not matter as much as the lessons learned that can be funneled back into Tracks #1 and #2 over time. Concept work helps to drive both incremental business improvements as well as transformation and innovation that could lead to big payoffs down the road.

It is interesting to note too that Amazon Go garnered mentioned both as conceptual work and as true store of the future work. That is because Amazon does things the right way.

Amazon Go was a concept car for Amazon far before it ever became a scaleable idea. The industry heard rumblings about Amazon Go for at least a year, while it was dark to the public and only open to Amazon employees, until Amazon worked the kinks out and then opened it up to the public for further experimentation and refinement. Amazon Go is the perfect example of how to move innovation work in and out of the appropriate buckets over time, without confusing it or having it get held up in the bureaucracy that often comes with incremental work.

It will be interesting to see what 2019 has in store (pun intended) for Amazon's other concept car-like initiatives, like GH Lab and Amazon 4-Star, both of which just started to rev their own concept car-like engines in front of consumers late in 2018.

Only time will tell, but it is an important question to think about because Amazon, just like any other retailer, should always have some degree of investment placed across all three tracks at any point in time. The degree to which the bets are placed should depend on the relative strength of the retailer's business model. Interestingly enough though, even a retailer like Amazon, who potentially has the strongest business model going, still sees tremendous value in R&D and refuses to rest on its laurels and pull back on experimentation.

Even going beyond just R&D investment, segmenting out store of the future work in the manner described above is also important because it highlights that not all work is created equal as well. The people inside of organizations who are good at driving incremental improvements on old business models are not necessarily the same people who are good at coming up with new and innovative ways to approach problems. Leaders and especially retail CEOs have to be aware of this issue and consciously delineate tasks and create safe havens for the right type of work to be conducted in the right manner. Concept work should involve very little sign-off outside the c-suite. CEOs should protect it from the the very people it is undertaken to disrupt, the legacy thinkers whose jobs are at risk if any of the ideas actually bear fruit.

Focusing only on technology and how it can scale incrementally across an already existing and wide-ranging store base closes a company's eyes to opportunities that might well be staring it right in the face. Silicon Valley would never keep their eyes solely locked on Track #1, nor would Amazon, and nor should any legacy retailer worth its salt.

Great companies think about all three tracks at the same time.

If you enjoyed this post, be sure to check out my blog Omni Talk and my YouTube page for even more great humor and insight.

I am a leading expert and influencer in omnichannel retailing, with nearly 20 years of experience across nearly every discipline within retail. Currently, I am CEO and founder of Red Archer Retail and Omni Talk, one of the fastest growing blogs in retail, and I sit on the a...